United Security Bancshares, Inc. Reports Growth in Net Income for
Fourth Quarter and Year

Net Income Rises 79% to $3.9 Million for 2013

March 19, 2014 05:00 PM Eastern Daylight Time

THOMASVILLE, Ala.--(BUSINESS WIRE)--United Security Bancshares, Inc. (NASDAQ: USBI) today reported a 78.9%
increase in net income to $3.9 million, or $0.65 per diluted share, for
the year ended December 31, 2013, compared with $2.2 million, or $0.36
per diluted share, for the year ended December 31, 2012. Net income for
the fourth quarter of 2013 rose 8.2% to $955,000, or $0.16 per diluted
share, compared with net income of $883,000, or $0.15 per diluted share,
for the fourth quarter of 2012.

“We made solid progress in building our profitability and reducing
problem assets since last year,” stated James F. House, President and
CEO of United Security Bancshares, Inc. “At the close of 2013, we marked
our seventh consecutive quarter of positive income as we benefited from
our program to reduce non-performing loans, other real estate owned
(OREO) and expenses related to OREO. The fourth quarter of 2013 also
marked our sixth consecutive quarter of reducing OREO and our fifth
consecutive quarter of reducing non-performing assets. Our
non-performing assets were down 44% to $21.5 million compared with the
fourth quarter of last year.”

“We have seen some indications of improvement in our local economy,
primarily related to rising timber prices and improvements in certain
customer balance sheets. However, economic conditions remain weak in
certain other sectors, including real estate development and
construction. Furthermore, while we continue our program of reducing
non-performing loans, competition in the commercial lending space
remains fierce. As a result of the mixed economic conditions and the
competitive environment, new loan production remained below the level of
loan payoffs and reduction in problem assets for the year. We expect
this trend to continue to restrain our earnings growth in 2014. Our
primary focus in 2014 will be to add quality loans while continuing to
reduce non-performing loans. We believe that making progress in these
areas will be key to building future profitability. We are fortunate to
have a strong capital base that is well above the minimum regulatory
requirements and that will support our future growth,” continued Mr.
House.

Fourth Quarter Results

Interest income totaled $8.3 million in the fourth quarter of 2013,
compared with $9.7 million in the fourth quarter of 2012. The decline in
interest income was due primarily to lower earning assets, primarily
loans, as well as reduction in yield, compared with the fourth quarter
of 2012.

Net loans totaled $300.9 million in the fourth quarter of 2013, compared
with $337.4 million in the fourth quarter of 2012. The decrease in net
loans was due to loan payoffs and write-downs outpacing new loan demand.
An overall weak economy in our markets, primarily centered in the real
estate sector, has been a significant factor in lower loan demand over
the past year.

Interest expense declined 23.8% to $677,000 in the fourth quarter of
2013, compared with $888,000 in the fourth quarter of 2012. The decrease
resulted primarily from lower interest rates paid on deposits compared
with the fourth quarter of 2012.

Net interest income was $7.7 million in the fourth quarter of 2013,
compared with $8.8 million in the fourth quarter of 2012. The decline in
net interest income was due to lower earning assets, primarily loans,
combined with an 80 basis point decline in net interest margin, compared
with the fourth quarter of 2012. Net interest margin was 5.86% in the
fourth quarter of 2013, compared with 6.66% in the fourth quarter of
2012. The decline in net interest margin was due primarily to the
overall decline in interest earned on loans and investments. In
addition, the yield on the investment portfolio declined due to the
early payoff of certain higher yielding bonds compared with the fourth
quarter of the prior year.

Provision for loan losses was a credit of $1.4 million in the fourth
quarter of 2013, compared with a charge of $1.2 million in the fourth
quarter of 2012. The credit to the provision for loan losses was due
primarily to adjustments to the allowance for loan losses resulting from
approximately $3.0 million in recoveries of loans previously charged
off. Charge-offs were $1.4 million in the fourth quarter of 2013,
compared with $2.0 million in the fourth quarter of 2012.

Total non-interest income was $723,000 in the fourth quarter of 2013,
compared with $1.5 million in the fourth quarter of 2012. The decrease
in non-interest income was due to lower service charges, credit life
insurance income and other income, all compared with the fourth quarter
of 2012. Service charges for the fourth quarter of 2013 included
approximately $566,000 in service charges that were refunded to
customers for a product that was discontinued. The refunded service
charges were initially recorded as non-interest income from the first
quarter of 2011 through the third quarter of 2013.

Total non-interest expense increased 12% to $8.6 million in the fourth
quarter of 2013, compared with $7.7 million in the fourth quarter of
2012. The increase in non-interest expense was due primarily to an
increase in salaries and employee benefits, and increased write-downs on
OREO, compared with the fourth quarter of 2012. The increase in salary
and employee benefits expense was primarily attributable to cost of
living adjustments, salaries paid to new officers hired in 2013,
increases in health insurance expenses and increases in accruals for
incentive payouts. OREO write-downs rose $429,000 to $1.0 million in the
fourth quarter of 2013, compared with $593,000 in the fourth quarter of
2012. The increase in OREO write-downs was due primarily to routine
reappraisals of OREO in the fourth quarter of 2013 that showed lower
appraised values than when the assets were previously appraised in
accordance with the Company’s appraisal policies. Total OREO declined to
$9.3 million at December 31, 2013, a 30% decline from $13.3 million at
December 31, 2012, representing the sixth consecutive quarterly decrease
in OREO.

United Security Bancshares, Inc. and First United Security Bank
continued to be rated as “well-capitalized,” the highest regulatory
rating, as of December 31, 2013. Total risk-based capital was 19.20% for
the Company and 19.34% for the Bank, compared with a regulatory
requirement of 10.0% for a well-capitalized institution and a minimum
regulatory requirement of 8.0%. The Tier 1 leverage ratio was 10.88% for
the Company and 10.97% for the Bank, significantly above the requirement
of 5.0% for a well-capitalized institution and minimum regulatory
requirement of 3.0%.

Twelve Months Results

For the year ending December 31, 2013, net income rose to $3.9 million,
or $0.65 per diluted share, compared with $2.2 million, or $0.36 per
diluted share, for the year ended December 31, 2012.

Net interest income for the year ended December 31, 2013, was $30.7
million, compared with $34.2 million for the same period of 2012. Net
interest margin declined to 5.95% in 2013 from 6.21% in 2012. The
decrease in net interest margin from 2012 was due primarily to the
overall decline in interest earned on loans and investments since last
year.

Provision for loan losses dropped to a credit of $642,000 in 2013,
compared with a charge of $4.3 million in 2012. The credit to the
provision for loan losses was due primarily to adjustments to the
allowance for loan losses resulting from approximately $3.9 million in
recoveries of loans previously charged off, including $3.0 million
received in the fourth quarter of 2013. Charge-offs totaled
$13.1 million in 2013, compared with $9.0 million in 2012.

Non-interest income declined to $4.9 million for 2013, compared to $5.6
million in 2012, primarily due to lower service charges in 2013 compared
to 2012. The decrease in service charges was due primarily to the
reversal of approximately $566,000 in service charges that were refunded
to customers in the fourth quarter of 2013 for a product that was
discontinued. The refunded service charges were initially recorded as
non-interest income from the first quarter of 2011 through the third
quarter of 2013.

Non-interest expense declined 5.2% to $30.8 million in 2013, compared
with $32.5 million in 2012. Non-interest expense declined in every major
category in 2013 compared with the prior year, except for salary and
employee benefits expense, which was up 11.5% compared with 2012, and
occupancy expense, which was up 2.6% compared with 2012. The increase in
salary and employee benefits expense was primarily attributable to cost
of living adjustments, salaries paid to new officers hired in 2013,
increases in health insurance expense and increases in accruals for
incentive payouts. Write-downs on OREO declined $2.5 million from 2012.

Shareholders’ equity rose to $70.1 million, or $11.63 per share, at
December 31, 2013, compared with $68.6 million, or $11.40 per share, at
December 31, 2012. The increase in shareholders’ equity from retained
earnings of $3.9 million was offset somewhat by a $2.6 million decrease
in accumulated other comprehensive income, due to a decline in the
market value of investment securities available-for-sale. The Company
did not declare a cash dividend on its common stock during 2013.

About United Security Bancshares, Inc.

United Security Bancshares, Inc. is a bank holding company that operates
nineteen banking offices in Alabama through First United Security Bank.
In addition, the Company’s operations include Acceptance Loan Company,
Inc., a consumer loan company, and FUSB Reinsurance, Inc., an
underwriter of credit life and credit accident and health insurance
policies sold to the Bank’s and ALC’s consumer loan customers. The
Company’s stock is traded on the Nasdaq Capital Market under the symbol
“USBI.”

Forward-Looking Statements

This press release contains forward-looking statements, as defined by
federal securities laws. Statements contained in this press release that
are not historical facts are forward-looking statements.These
statements may address issues that involve significant risks,
uncertainties, estimates and assumptions made by management.USBI
undertakes no obligation to update these statements following the date
of this press release, except as required by law.In addition,
USBI, through its senior management, may make from time to time
forward-looking public statements concerning the matters described
herein.Such forward-looking statements are necessarily estimates
reflecting the best judgment of USBI’s senior management based upon
current information and involve a number of risks and uncertainties.Certain
factors that could affect the accuracy of such forward-looking
statements are identified in the public filings made by USBI with the
Securities and Exchange Commission, and forward-looking statements
contained in this press release or in other public statements of USBI or
its senior management should be considered in light of those factors.Specifically, with respect to statements relating to loan demand,
growth and earnings potential and the adequacy of the allowance for loan
losses for USBI, these factors include, but are not limited to, the rate
of growth (or lack thereof) in the economy, the relative strength and
weakness in the consumer and commercial credit sectors and in the real
estate markets and collateral values.There can be no assurance
that such factors or other factors will not affect the accuracy of such
forward-looking statements.

UNITED SECURITY BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in Thousands, Except Share Data)

December 31,

December 31,

2013

2012

(Unaudited)

ASSETS

Cash and Due from Banks

$

10,276

$

12,181

Interest-Bearing Deposits in Other Banks

37,444

41,945

Total Cash and Cash Equivalents

47,720

54,126

Federal Funds Sold

-

5,000

Investment Securities Available-for-Sale, at fair value

135,754

92,614

Investment Securities Held-to-Maturity, at amortized cost

35,050

21,136

Federal Home Loan Bank Stock, at cost

906

936

Loans, net of allowance for loan losses of $9,396 and $19,278,
respectively